Asian Journal of Research in Business Economics and Management
Year : 2014, Volume : 4, Issue : 4
First page : ( 213) Last page : ( 225)
Online ISSN : 2249-7307.

Price Transmission Mechanism in the Iran Chicken Market Using the TECM, ECM-EG and GETS Models

Shadmehri Mohammad Taher Ahmadi

Department of Economics, School of Economics and Administers Sciences, Ferdowsi University of Mashhad, Mashhad, Iran

Online published on 15 April, 2014.

Abstract

The present paper studies the existence of asymmetry in the price transmission mechanism between the producer and the consumer prices in the Iran chicken market. Data used in the research include consumer price index and producer price index for chicken covering monthly periods of 91 months since March 2001 through September 2008. Johansen's cointegration method and Granger causality test were used to examine whether there is a long run relationship between the two indices and to determine causality direction. For the study of the asymmetry, three dynamic models were estimated: The Threshold Error Correction Model (TECM Model), the Engle – Granger Error Correction Model (ECM-EG Model) and the LSE−Henry general to specific model (GETS Model). The results indicate that there is a long-run relationship between each pair of producer and consumer prices. There is a causality direction from consumer prices to producer prices in long-run and mutual causality in short-run. The results of three models reject the hypothesis of asymmetric price transmission in the long-run, while it has confirmed in the short-run by ECM-EG model.

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Keywords

Iran, price transmission. Causality relation, Johansen and Juselius, chicken, TECM model, GETS model.

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